Closing summary

• Europe's jobless crisis has deepened, with the news that the unemployment rate across the eurozone has risen to a new record high of 11.8% (details from 10.05am)

Youth unemployment has also risen again (see 10.18am and also 10.40am), hitting 24.4% across the eurozone. In Spain, 56.5% of young people are out of work.

Economists warned that the data shows that Europe is still stuck in a severe economic mess, despite the progress made in 2012 to hold the eurozone together (see 3.13pm).

•Antonis Samaras and Angela Merkel have held talks in Berlin. The two leaders looked on friendly terms, and said Europe must make more progress (see 12.10pm)

•Ireland has warned that Britain cannot simply rewrite its relationship with the rest of Europe. Deputy prime minister Eamon Gilmore added that Britain's possible exit from the EU was now a bigger threat than the possibility of Greece leaving the euro (see 4.26pm).

•Japan has promised to support Europe by buying bonds issued to fund its bailouts. The announcement (see 8.29am onwards), is meant to help stabilise the world economy.

•Jeroen Dijsselbloem looks to be on track to add eurogroup president to his CV, alongside Dutch finance minister. (see 11.46am) So you'd better practice the pronunciation (see 4.39pm).

Thanks for reading and commenting -- I"ll be back for more tomorrow. Goodnight!

Either way as investors look at the latest company earnings reports it seems that sitting on ones hands for now is the preferred option until companies start to give a clearer idea of what their forward guidance is likely to be.

During the press conference, Irish ministers also reiterated that they still want to be able to tap the eurozone's new bailout structures (having agreed to rather more painful conditions when they sought help)

Unemployment: what the experts say....

Several have warned that EU leaders are too complacent about the situation -- following Jose Manuel Barroso's claim yesterday that the threat to the euro has been repelled.

Here's a round-up:

Graeme Leach, chief economist at the Institute of Directors

The new Eurozone unemployment figures are shockingly bad.

The Draghi plan may have bought time, but that is all it has done – it is clear that the economic implosion of several member states continues at a troubling pace. The headline figures spell bad news, but that is compounded by the political and human impact of terrifying levels of youth unemployment in Spain, Greece and Italy.

This saga is far from over, whatever President Barroso may believe, and it seems it is set to get worse in 2013.

Tim Ohlenburg, senior economist at the Centre for Economics and Business Research

Given the proximity of the unemployment rate to previous results going back more than a decade, we can see that the overall level isn’t the problem. It’s the widening gulf between core and periphery. Diverging government bonds yields show different economic trajectories and put strain on monetary union. The labour market also exposes just how far the Eurozone has moved away from the founding ideal of synchronised economic cycles. Unemployment in Greece (26.0% in September) and Spain (26.6% in November) now lies more than 20 percentage points above the level of Austria (4.5% in November) – picture a line of Greeks where one in four is without a job, compared with one in twenty Austrians.

The policy response is limited to structural reforms. Governments have embarked on cost cutting and revenue raising to plug fiscal deficits. The European Central Bank supports the deficit reduction and reform agenda, standing ready to rescue nations from rising bond yields if necessary. But otherwise it remains idle, leaving interest rates untouched and holding off from further monetary injections.

In other words, the Eurozone is trundling further into recession, but neither states nor the central bank are taking action. Reform will have to be undertaken the long and painful way: falling wages in the periphery amid widespread unemployment, rising wages in the core thanks to a weak euro and loose monetary policy. In the absence of mitigating economic policies, such as transfers from core to periphery, the current divergence of the common currency area is a prerequisite for future convergence. But too wide a gulf is also unsustainable due to increasingly adversarial political pressures. The Eurozone faces a long and hard trek, it remains unclear if it can reach the summit intact.

Howard Archer of IHS Global Insight

With the Eurozone likely having suffered a third successive quarter of modest GDP contraction in the fourth quarter of 2012 and facing a difficult looking 2013, and with Eurozone business confidence still relatively low - the likelihood is that Eurozone unemployment is headed significantly higher.

So one has to ask, what is the euro for? Why is it self-evidently a positive public good for the peoples of Europe?

Why sacrifice the lifeblood of parliaments for an economic experiment that is not even offering a `Chinese' trade-off of prosperity in exchange for abridged liberties. Why sacrifice democracy for a Barroso Model that has generated a youth jobless rate of 56.5pc in Spain?

These are the questions that Mr Barroso and his successor will have to answer over the next three years as the Club Med slump grinds on. We are no longer in the frothy – dare I say trivial – phase of financial crisis. We are by now in the deadly serious phase of economic and political crisis.

Mr Barroso was once a Maoist and a student activist in Portugal's Carnation Revolution against the reactionaries. Good for him.

Which side would he be on now if he were 40 years younger?

In Barroso's defence, the EC president is playing a leading role in Europe's push to deliver economic stability and growth (for example). Problem is - it ain't delivering (yet?).

France denies downgrade rumours

The French finance minister has squashed speculation that the country's credit rating is being cut.

The rumour began rattling around the City about half an hour ago, but wasn't being taken terribly seriously. After all, Fitch only reaffirmed its AAA rating in December, and it's a little early for S&P or Moody's to cut again (they both rate France AA+).

Barclays Capital put out an interesting research note today, predicting a lively year for the European banking sector.

With the Eurozone crisis in remission, for now at least, we see scope for much greater differentiation between banks – strategically, operationally, in valuation and in share price performance terms.

One reason is that banks could start repaying some of the huge liquidity boost they received from the European Central Bank in December 2011 and February 2012, called the Long Term Refinancing Operations.

Those three-year LTROs helped to protect the eurozone from another credit crunch, and banks don't have to repay them for the full 36 months. But stronger banks could move earlier (perhaps to recover collateral from the ECB to use in more lucrative ways).

Weak banks are more likely to hang on, though, so it will be interesting to see who moves [a rush of early LTRO redemptions could also show renewed confidence].

This handy graph shows which banks took the most 'free money' from the ECB:

Photograph: Barclays Capital

There's a certain clustering of Southern European banks on the left, and Northern ones on the right.

Photos: Antonis Samaras and Angela Merkel

Greek prime minister Antonis Samaras (left) reaches out his hand to German chancellor Angela Merkel after they address the media at the Chancellery in Berlin 8 January 2013. Photograph: FABRIZIO BENSCH/REUTERS

Over in Berlin, Antonis Samaras and Angela Merkel have held a brief press conference before starting their meeting today.

The two leaders appeared cordial – and both told the assembled journalists that the eurozone was on the right course, but that more work was needed.

Greek prime minister Samaras said:

I would like to make clear up front that our country is undertaking great efforts that are linked with great sacrifices to get things back on track.

We are trying to win back credibility, on the part of the people of Europe and on the part of the markets.

Photograph: Carsten Koall/Getty Images

Chancellor Merkel, though, warned that 2013 will be difficult.

We must agree on stronger economic policy cooperation by June this year, and there is plenty of work ahead of us.

Regarding Greece, Merkel said she would "of course be interested in what progress the implementation of the Greek reform programme is making".

The Greek parliament approved that austerity package late last year (thus triggering new aid payments), but many of the measures have not been implemented.

We're not expecting any further official comments from Merkel or Samaras today.

Dutch finance minister tipped for Eurogroup hot seat

Speculation is growing that Jeroen Dijsselbloem, the not-particularly-internationally-well-known Dutch finance minister, will be named as the next president of the Eurogroup.

The prestigious role (chairing the regular meetings of eurozone finance ministers) is up for grabs following Jean-Claude Juncker's decision to step down.

Dijsselbloem's name has been 'in the mix' for weeks, and Reuters is now reporting that the 46-year old fin. min. is conducting a European mini-tour, and very likely to get the job.

On Monday he met European Council President Herman Van Rompuy, as well as his colleagues from Belgium and Luxembourg.

He is expected in Rome on Tuesday and Paris on Wednesday.

"It looks like it is moving in the direction of the Dutch," one senior euro zone policymaker said.

Dijsselbloem only became Dutch finance minister in November, but has apparently impressed his counterparts. The Wall Street Journal writes today that Dijsselbloem would be the latest low-profile official or politician to take a senior job in Europe, and also has nationality on his side:

The Netherlands, which is an important player in the euro-zone debate as one of the bloc’s most credit-worthy governments, hasn’t landed a top European job for one of its own recently.

The Italians have Mario Draghi as president of the European Central Bank. The French had Jean-Claude Trichet there for eight years, and they got Christine Lagarde as head of the International Monetary Fund. The Germans got Klaus Regling to lead the European Stability Mechanism, the euro zone’s new bailout fund. The Finnish have Olli Rehn, the EU’s economics commissioner, and the Austrians have Thomas Wieser as head of the Eurogroup Working Group, the body of senior bureaucrats that crafts the euro zone’s response to the crisis and does much of the legwork for the finance ministers.

Eurozone business sentiment rises

On a brighter note, though, economic sentiment in the eurozone has improved.

The EC's monthly test of business morale rose in December for the second month running - beating analyst forecasts (it hit 87, up from 85.7 the previous month). That suggests firms may be growing more optimistic about Europe's prospects.

Today's unemployment data rather takes the shine off recent claims that the eurozone crisis is over. The immediate threat to the single currency has receded, but politicians and policymakers still face an ailing economy. Initiatives such as a banking union or the ECB's bond-buying programme may hold the eurozone together, but they don't deliver the hope of immediate growth.

The early reaction to the statistics focuses on the grim youth unemployment levels:

WEF: Economic crisis threatens green agenda

The World Economic Forum has just warned that persistent economic weakness is sapping the ability to tackle the mounting threat from climate change.

Our economics editor Larry Elliott has the story:

Two weeks ahead of its annual meeting in Davos, the WEF said widening wealth gaps and unsustainable government debt were the two biggest risks cited by a panel of over 1000 experts and industry leaders.

Rising greenhouse gas emissions was the third most likely risk.

"Continued stress on the global economic system is positioned to absorb the attention of leaders for the forseeable future. Meanwhile the Earth's environmental system is simultaneously coming under increasing stress," the Global Risks 2013 report said.

"Future simultaneous shocks to both systems could trigger the 'perfect global storm' with potentially insurmountable consequences".

About that yen weakness....

I mentioned earlier that the yen had weakened against the dollar as Japan made its move around 2.20am GMT. Well, the effect didn't last long, as this graph of the yen against the dollar shows:

Photograph: Reuters

That may be because traders have digested the fact that Japan will be using its existing currency reserves to buy bonds from the European Stability Mechanism, as Financial Times currency correspondent Alice Ross explains

Japan pledges to buy eurozone bailout bonds

Japan has announced that it will help Europe through its debt crisis by purchasing bonds issued by the eurozone bailout fund.

Speaking in Tokyo this morning the new Japanese finance minister, Taro Aso, announced that Japan plans to "continuously" take part in debt auctions conducted by the European Stability Mechanism, possibly starting today.

Aso refused to say how much Japan would buy, but insisted the plan would support Europe -- and also benefit Japan by helping to weaken the yen.

Slew of data will show state of euro economy

There's a busy morning ahead of us – at 10am GMT, fresh unemployment data for November 2012 will be released. Economists fear that the jobless rate across the eurozone could hit a new record high, up from November's 11.7%.

With eurozone retail sales and economic confidence data also due at 10am GMT, and German factory orders an hour later, we should get a decent health check on Europe.

And on the political front, Angela Merkel and Antonis Samaras are meeting in Berlin today. The German chancellor and Greek PM are expected to hold a brief press conference this morning.

I'll also be watching Italy, where the general election campaign is well under way following Silvio Berlusconi's new alliance with the Northern League party (see yesterday's blog...).